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No end in sight to stand-off between DoT, telecom firms

No end in sight to stand-off between DoT, telecom firms

New Delhi: All efforts by the department of telecommunications (DoT) to break the impasse with the country’s telecom operators over a 2G spectrum policy have foundered as all of them have divergent interests.

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“There are various issues on which decisions have to be taken and the government has to take a decision on these regardless of whether there is a convergent view from everyone," a senior DoT official said.

“These include issues like pricing policy as well as refarming. These decisions have to be taken before the auction takes place," he added.

DoT had informal discussions regarding various options that were possible regarding both pricing and refarming.

Regarding the pricing issue, DoT has offered four options once the market value of spectrum is discovered at the auction.

These include the charging of all spectrum prospectively (for the remaining validity period of the licences), for spectrum above the contracted 6.2Mhz, for spectrum above the start-up 4.4Mhz and not charging for the spectrum at all.

The burden on the newer operators is likely to be far heavier than on the older ones, going by the proposals.

Finding a compromise is key to breaking the impasse and enabling decisions that will determine the future of 2G spectrum and thereby the industry itself.

These decision relate to the reduction of spectrum usage charges in return for a higher spectrum charge, spectrum sharing, liberalization of spectrum as well as issues related to inter and intra circle roaming.

Spectrum liberalization refers to allowing operators to use any technology on the spectrum they have bought in the auction or has been allocated to them.

“Essentially, operators would be given the option to either pay for the remaining period of the licence, and then pay a market-based price at the time of renewal, or pay the current market-based price from a certain date and then keep it for 20 years," a second DoT official said.

All these options have met with rejection and criticism from several quarters. This is because the concerns of operators are not uniform.

“Some operators like Reliance and Tata have 10-15 years left of their validity while the incumbent GSM operators have just two-three years. It would mean a huge difference in the outgo between the operators," a senior official with one of the dual technology operators said, requesting anonymity.

“CAG (Comptroller and Auditor General of India) had said that they should pay retrospectively for the spectrum above 6.2Mhz and the additional spectrum cost the exchequer a loss of around 35,000 crore," he added.

The issue of charging retrospectively has been put to the Supreme Court as part of the presidential reference that’s pending before it.

Similarly, on the refarming of spectrum, the DoT has also offered four options. Refarming, according to DoT, refers to the taking back of spectrum allocated to the operators once the validity has run out and then re-allotting it based on the decided criteria.

The options offered to the operators include the taking back of all the spectrum allocated and putting it all up for auction.

“In this case, there are no guarantees that the operator will get all the spectrum back," the DoT official said.

Other options include the operator paying the new market price discovered, via auction, for a renewed period; refarming of all spectrum above 5Mhz or refarming all spectrum above 2.5Mhz.

It was not immediately clear what the thinking behind the last two options are.

These options were also heavily flayed. “Once the validity is over, then it is over. They have to participate in the auction for all the spectrum. You cannot allow them to avoid the auction," a senior analyst with a Mumbai based brokerage firm said.

In return for the package, DoT has asked that the telecom operators drop all court cases related to the various decisions that have been taken and also agree to not start any fresh litigation against DoT on these issues.

“It sounds like the DoT is looking at doing something similar to what was done around 1999 when the operators were moved from a fixed fee for offering telecom services to a revenue share model. The business has changed a lot since then and it is unlikely to be acceptable," the brokerage analyst said.

“If anything, there will likely be more court cases," he added.

“Since the intention is to charge for all spectrum prospectively, those who have the shortest period to renewal would stand to gain differentially as compared to those whose licences were issued later," N. Srinath, managing director, Tata Teleservices, wrote in a 4 June letter to DoT. “Dual technology players would end up paying twice for spectrum," Srinath wrote.

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